May 29 2024 Market Update

NYMEX June contract expired today.

Price action was a rather straightforward follow through from the sell off after last week’s (bullish) storage print.  The report was smaller than the forecast, which would be considered a bullish number. However the market sold off, which would suggest that there is underling weakness.

At 530am, July contract started selling off from $2.82US/mm and got down to $2.67 as of noon.  We are now trading at almost the same level as the March 5th high.

Reasons given are weaker near-term temperatures.  More importantly, we are hearing that producers are opening up the taps to take advantage of the price run up in May.  The monthly production record was 105.5 Bcf/d in December 2023, but lower prices have encouraged producers to cut back on production.  So far, May has averaged 97.7 BCF/d, which is up from the May 1 output of 96.3Bcf.  They are encouraged to increase production with this spike in prices. 

All things being equal, this would put a ceiling on any run up in prices in the medium term barring anything radical and unexpected happening. Fair to say that if it was record production only five short months ago, they could ramp up gas production with only a short lead time. The fact that storage is historically full for this time of year would also reduce the possibility of a radical spike in prices in the medium term.  Having said all that, I need to remind you that natural gas has the reputation of being the widow maker and often does the unexpected.

The rest of summer strip mirrors this price action: from a high last Thursday of $3.78US/mm, we are now trading $3.47, the same level as March high.

Winter 24-25 is now at the same level the March/April/early May highs around $3.50US/mm.  If you were to call the March to early May price action a range, then we broke out in mid May and have now retracted back down to the top of that range.  Logical to expect that we would catch our breath and June starts to trade back within that range.

Summer 25 is back in the middle of the range.

Winter 25-26 is doing the same thing.

Storage report is tomorrow and early consensus is for an injection of +74 Bcf, as compared to the +78Bcf injection last week.  Remember that a bigger than consensus injection is bearish (more gas in the system) and a smaller than consensus injection is bullish (less supply than expected). [WFG]

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